{"id":36427,"date":"2018-11-02T17:25:26","date_gmt":"2018-11-02T11:55:26","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=36427"},"modified":"2018-11-05T10:00:52","modified_gmt":"2018-11-05T04:30:52","slug":"always-a-fine-balance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/always-a-fine-balance\/","title":{"rendered":"Always a fine balance"},"content":{"rendered":"<p><a href=\"https:\/\/www.thehindu.com\/todays-paper\/tp-opinion\/always-a-fine-balance\/article25396443.ece\"><strong>Always a fine balance<\/strong><\/a><\/p>\n<p><strong>News:<\/strong><\/p>\n<ol>\n<li>The article discusses about the recent simmering tensions between the Reserve Bank of India and the Centre.<\/li>\n<\/ol>\n<p><strong>Important Facts:<\/strong><\/p>\n<ol>\n<li>A certain amount of creative tension is systemically in-built between Reserve Bank of India and Centre given their different perspectives.<\/li>\n<li>For example, Centre\u2019s concern is short-term and political while RBI\u2019s concern is long-term and technical.<\/li>\n<li>Though such tension is good for the economy, but there are few issues over which both the Centre and RBI are irked over each other.<\/li>\n<li><strong>Centre- RBI Conflict:<\/strong><\/li>\n<\/ol>\n<ul>\n<li><strong>Non-Performing Assets: <\/strong>Centre has refused to accept Governor Urjit Patel\u2019s point that the RBI is hobbled by lack of adequate powers in regulating public sector banks to handle the non-performing assets crisis.<\/li>\n<li>Though the RBI expresses concerns about not having enough powers over PSBs but it does have nominee directors on bank boards which leads physical inspection and financial audits at banks.<\/li>\n<li><strong>Forex reserve and fiscal deficit: <\/strong>The Centre is eyeing RBI\u2019s burgeoning reserves to bridge its fiscal gap which RBI resents.<\/li>\n<li><strong>Payments regulator:<\/strong> The Centre is attempting to set up an independent payments regulator, which the RBI sees as encroachment of its jurisdiction.<\/li>\n<\/ul>\n<ol start=\"5\">\n<li><strong> Recent tensions: <\/strong>The government\u2019s intervention through the board sparked recent tensions between RBI and Centre as follows:<\/li>\n<\/ol>\n<ul>\n<li><strong>RBI\u2019s recent circular on stressed assets recognition: <\/strong>According to RBI recent circular, if a borrower delayed payment for even one day, he should be dragged to an insolvency court and the asset classified as a non-performing asset (NPA).<\/li>\n<li><strong>Diluted PCA: <\/strong>The Centre sees the prompt corrective action (PCA) framework by the RBI, which restricts weak banks from lending, as contributing to the liquidity crisis and wants it to be diluted.<\/li>\n<li><strong>Relaxed lending norms: <\/strong>Centre also wanted special dispensation by the RBI to help non-banking finance companies (NBFCs) apart from relaxed norms for lending to micro, small and medium enterprises.<\/li>\n<\/ul>\n<ol start=\"6\">\n<li><strong> View of the former Governors on RBI\u2019s autonomy:<\/strong><\/li>\n<\/ol>\n<ul>\n<li><strong>YV Reddy <\/strong><strong>In his book, Advice and Dissent: My Life in Public Service <\/strong>explains RBI autonomy under three functions:<\/li>\n<li>Operational issues in which full RBI autonomy is mandated.<\/li>\n<li>Policy matters where prior consultation with the government is required.<\/li>\n<li>Structural reforms which requires \u201cvery close coordination\u201d with the government.<\/li>\n<li><strong>Raghuram Rajan In his book \u201cI Do What I Do\u201d<\/strong>, points out that the position of the RBI Governor in the government hierarchy is not defined.<\/li>\n<li>The Governor draws the salary of a Cabinet Secretary, and it is generally understood that he will explain his decisions only to the Prime Minister and the Finance Minister.<\/li>\n<\/ul>\n<ol start=\"7\">\n<li><strong>Way forward:<\/strong><\/li>\n<\/ol>\n<ul>\n<li>The RBI could have heeded the Centre\u2019s signals on easing liquidity through extraordinary measures in addition to routine open market operations to ease the liquidity crises.<\/li>\n<li>Section 7 of the RBI Act allows the government to give written directives to the RBI in the public interest.<\/li>\n<li>On critical issues, often the choice for the Governor is to concede to the government with or without a written directive. But tradition has been that both the government and the RBI have avoided recourse to this provision.<\/li>\n<li>RBI is autonomous and accountable to the people ultimately, through the government and the onus is thus on responsible behaviour by both sides.<\/li>\n<li>The Governor thus has to be conscious of the limits to his autonomy at all times, and the government has to consider the advice coming from RBI in all seriousness,<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Always a fine balance News: The article discusses about the recent simmering tensions between the Reserve Bank of India and the Centre. Important Facts: A certain amount of creative tension is systemically in-built between Reserve Bank of India and Centre given their different perspectives. For example, Centre\u2019s concern is short-term and political while RBI\u2019s concern&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/always-a-fine-balance\/\">Continue reading <span class=\"screen-reader-text\">Always a fine balance<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[577,217,578,579],"class_list":["post-36427","post","type-post","status-publish","format-standard","hentry","category-test-1","tag-centre-rbi-conflict","tag-gs-3","tag-payments-regulator","tag-reserve-bank-of-india","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704951509},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/36427","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=36427"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/36427\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=36427"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=36427"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=36427"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}